India’s largest private insurer HDFC Life Insurance on Friday announced that its board has approved acquisition of 100% of the share capital of Exide Life Insurance Company for a total consideration of Rs6,687 crore. Shares of HDFC Life were trading over 3% lower on the BSE in Friday's early deals whereas that of Exide Industries surged 10%. 

Here are the details of the proposed acquisition in 10 points:

• The life insurance company will acquire 100% stake in Exide Life from Exide Industries through issuance of 8,70,22,222 shares at an issue price of Rs685 per share and a cash payout of Rs726 crore aggregating to Rs6,687 crore.

• The process for merger of Exide Life, a unit of battery maker Exide Industries, into HDFC Life will be initiated on completion of the acquisition.

• The biggest insurance deal in the country may spur further consolidation in the sector, which has about 57 firms, including two dozen life insurers.

• The embedded value of Exide Life, as on 30th June 2021, is Rs2,711 crore and has been reviewed by Willis Towers Watson Actuarial Advisory LLP, HDFC Life said.

• HDFC Life’s scale, market-leading digital and product innovation capabilities and prudent risk management strategy will aid in optimizing cost and over time, achieve higher margins for the acquired business, it added.

• HDFC Life further added that the proposed transaction will accelerate the growth of its agency business, as well as strengthen other distribution channels including Broker, Direct and Co-operative Banks.

• Further, a good quality, predominantly traditional and protection focussed business, will augment the existing embedded value of HDFC Life by approximately 10%. The company expects Exide Life's strong foothold in South India, especially in Tier 2 and 3 towns, to provide access to a wider market.

• The entire process, including the acquisition and subsequent merger, is subject to obtaining the relevant regulatory and other approvals.

• HDFC Life said that customers will benefit from stronger product suite, wider distribution network and more service touch points.

• It expects synergies to enhance shareholder value with potential to improve new business margins via operating leverage and product mix optimisation.

Commenting on the proposed transaction, Deepak Parekh, Chairman, HDFC Life said, “This is a landmark transaction, first of its kind, in the Indian life insurance space. It would enhance insurance penetration and further our purpose of providing financial protection to a wider customer base."

“We believe that this amalgamation can result in value creation for customers, employees, shareholders and distribution partners. It gives us an opportunity to realise synergies arising out of complementary business models, and further bolster our proprietary distribution network," said Vibha Padalkar, MD & CEO, HDFC Life.